Markets March On, Reality Not Included
Market Report for Wednesday, July 2, 2025
Markets March On, Reality Not Included
Rate-cut hopes, record closes, and trade tempests no longer seem at odds. They’re just characters in the same farce, performing under a marquee that reads: Still Bullish, Somehow.
Level Change 7/2/25 (%)
– – – – – – – – – – – – – – –
-0.0 Dow
+0.9 Nasdaq
+0.7 Nasdaq 100
+0.5 S&P 500
+1.0 S&P 400
+1.3 S&P 600
The S&P and Nasdaq notched fresh record highs Wednesday, because apparently the best time to chase stocks is when jobs disappear, tariffs rise, and Congress lights the budget on fire. Risk-on, indeed.
Let’s start with labor: ADP’s June payrolls print showed a 33,000-job decline, well below the expected 115,000 gain, and the worst reading since March 2023. March 2025 was revised down as well. Losses hit services hardest, especially education and health. Investors read this as bullish: fewer paychecks mean lower inflation, which means—say it with me—rate cuts.
Except the Fed isn’t playing along.
Chair Powell reiterated that it’s the tariff barrage gumming up the rate-cut gears. “All inflation forecasts went up materially,” he said yesterday, echoing last week’s Senate testimony, in which he helpfully quantified the problem: “The tariffs during Trump’s first term were one-sixth the size they are now.”
The Fed is data-dependent, and the data now come shrink-wrapped in tariffs. Wondering why rate cuts are stalled despite cooling inflation? Blame the White House’s own war on imports. As noted here in April: the arsonist is blaming the firefighters.
Speaking of trade diplomacy by blunt object, President Trump doubled down on not extending the July 9 negotiation deadline and mused on tariffs of “30% or 35% or whatever” on Japan, this week’s designated punching bag.
Meanwhile, in the debt factory known as Capitol Hill, the Big Beautiful Bill wafted out of the Senate and into the House, where noses scrunched. Representative Massie (R-KY) claims he has the votes to block it. Thunderstorms grounded other GOP lawmakers en route to Reagan just as the bill, fittingly, rains on America’s parade.
The nonpartisan Congressional Budget Office estimates the bill will add $3.3T to the debt over a decade, despite $1.2T in cuts to Medicaid and SNAP. Senator Warnock (D-GA) dubbed it “Robin Hood in reverse.” Wall Street called it “margin expansion.”
And that was the day: bad job numbers, bigger tariffs, busted budgets … and stocks floating higher on the helium of selective hearing.
— Jason Kelly